Forensic Accounting, Forensic Finance and Forensic Economics

SP&H’s experts regularly provide expert testimony in litigation disputes and economic damages

analyses. As part of our work, we perform forensic accounting and develop financial opinions.

Forensic work often includes:

• Review and analysis of financial statements, tax returns, general ledgers, budgets and forecasts;

• Analysis of source documents used to create financial statements, including bank statements, internal accounting and bookkeeping records;

• Financial ratio analysis;

• Development and analysis of financial and performance metrics; and

• Development of appropriate financial statement adjustments and/or the complete reconstruction of financial statements.

Two recent engagements highlight SP&H’s forensic accounting experience:

Burning Calories or Cash?

A gym chain of fitness studios was concerned about internal fraud. SP&H was engaged to perform forensic accounting analyses for the business to determine the existence of fraud and the related economic damages suffered by the business. By interviewing key employees, reviewing internal accounting records and supporting documents, and examining the accounting practices and procedures, we evaluated the business’ internal controls. We also reviewed external documents prepared by third parties, such as bank statements, bills/invoices, purchase/sell orders and shipping records. Completeness, accuracy and classification tests were conducted based on internal and external information sources. Our analyses uncovered numerous discrepancies and irregularities spanning several years, resulting in the affirmation of fraud and significant economic losses.

Shrinking Profits

Over the course of several years, a “passive” business owner saw a gradual decline in his company’s profits. The owner was concerned that a key employee was engaged in fraud, causing profits to disappear. This key employee was fired, and SP&H was engaged to determine whether the changes in the business’ performance were the result of fraud or outside factors, such as the economy or industry and market changes. SP&H analyzed the business’ financial trends, operating metrics, and financial ratios before, during and after the key person was running the business. Considering internal accounting and operations procedures and comparing the performance to independent industry and market data enabled SP&H to quantify damages resulting from fraudulent actions.